Miscanthus Mania

Just a few months into the development of its miscanthus-growing Biomass Crop Assistance Program project areas, solid biofuels producer Aloterra Energy LLC sees the BCAP program’s job creation goal rapidly coming to fruition.

Since the project areas were announced in June, inquiries about the program and how to get involved in the projects have come in from all over the country, as well as internationally, according to Scott Coye-Huhn, director of business development for Aloterra. And the rhizomes haven’t even been planted yet.

“That’s part of the job growth in this,” he says. “We have many companies, even entrepreneurs, coming to us with ideas as to how they can support our project, which is really exciting.”

Most of the BCAP project areas Aloterra has interest in occupy regions that have suffered from high unemployment rates, Coye-Huhn explains. So he doesn’t conceal his enthusiasm when discussing the new small businesses getting off the ground that will provide harvesting and trucking services for the farmers participating in those stricken project areas.

Near Aurora, Mo., farmer Rusty Mulford says people are lined up to help harvest and transport giant miscanthus. “It’s just BCAP creating more jobs,” he says.

But besides job creation, and perhaps equally important, the BCAP funding is also helping to establish the groundwork for a miscanthus-based bioenergy industry that maybe soon won’t need any financial help from the government.

“We are looking at projections that we’ll be able to plant this incredible energy crop for the same price as corn in a few years,” Coye-Huhn says. “Anyone in America that wants an energy crop is going to have access to it because of BCAP.” The program is about more than just creating project areas and growing some energy crops, he emphasizes.

“This is about sowing the seeds, pardon the pun, for the energy industry and getting the infrastructure in place and learning what works and what doesn’t work,” he says. “All of these things are happening very quickly.”

The Projects

Of the nine BCAP project areas, Aloterra has four, spanning four states. The company will solely operate its project stretching across northeast Ohio and into a bit of northwest Pennsylvania. In Missouri, Aloterra is developing two areas—one near Columbia in the central part of the state and the other in the southwest near Aurora, with partner farmer cooperative MFA Oil Co. The two organizations have formed MFA Oil Biomass LLC, which will handle the projects. MFA Oil Biomass will also be responsible for another project area in Arkansas.

“To our surprise, there was a strong call from the farming community in northeast Arkansas,” Coye-Huhn says. The area has a number of unique problems, including significant underground water resource depletion and runoff. “And the farmers are looking for solutions and one of those solutions, as they see it, is our crop miscanthus because it’s very efficient in its water use and is a good alternative, an option, for them. So we agreed to start another project down there under BCAP and it’s actually ended up being one of our strongest areas.”

In total, the four areas represent about 18,000 acres and more than 200 farming families who have dedicated their land to the perennial crop. “Our goal is 50,000 acres in each area,” Coye-Huhn says. “The government allocated us enough money to get us started this year with BCAP.”

Those farm families are responsible for 25 percent of the planting costs out-of-pocket, but get a rent payment for their land and matching payments on the backend of up to $45 per ton of harvested and delivered miscanthus.

Aloterra and MFA Oil Biomass are in the process now of completing the contracts and conducting rigorous environmental and conservation plans for each farm. “The expectations are fairly high,” Coye-Huhn says, adding that the government wants to be absolutely certain that it is not introducing a problem plant.

How it Works

With environmental consideration plans in place, planting for the BCAP areas is set to begin in the spring. Aloterra and MFA will handle that aspect of the project with around 20 custom-made rhizome-tailored planters, as traditional seed-planting farm equipment will not be sufficient. “It’s a pretty massive logistical undertaking,” Coye-Huhn says.

The farmers will then be responsible for growing and caring for the plants, which take two years to mature before a proper harvest can commence. Because the crop is so dense and cannot be easily harvested by most traditional farm machinery, Aloterra and MFA will have harvesting services available for their farmers, in addition to the independent local companies gearing up to provide jobs in harvesting and transporting.

Farmers will transport the miscanthus not more than 50 miles to either Aloterra’s pellet facility in Ohio or MFA Oil Biomass’s pellet plant in Missouri. The Ohio mill now produces small batches of pellets for test-firing using miscanthus from Aloterra's own non-BCAP Ohio farm. But the Missouri plant produces a modest several tons per hour, also with miscanthus pulled from non-BCAP participant fields, for a few customers under contract. The 18,000 BCAP acres are set to yield between 10 and 15 tons of miscanthus per acre, producing about 216,000 tons of pellets per year. But at full capacity, at the 50,000 acres-per-project-area goal, the facilities will together be pumping out around 2.4 million tons of pellets per year. Market opportunities for those pellets lie in combined-heat-and-power applications and commercial power plants, but primarily in agricultural heating markets, Coye-Huhn says.

“With our farmer co-op in Missouri, we had a fairly large customer base built in,” he says. “We have a huge agricultural heating need in this country.” The need is massive in the sector, which currently relies on fuels that fluctuate in price, such as propane. The miscanthus pellets, however, have a cost per Btu very competitive with propane.

Coye-Huhn emphasizes energy costs as the No. 1 issue for farmers today and expects it to only get worse without more advancements such as this. He specifically addresses poultry farms and their need for barn heating that isn’t harmful to their animals.

“The type of heating can actually influence the health and size of their birds,” he says. “We know that our pellets actually create larger chickens and create an environment more conducive than other heating fuels. So it’s not just about cost for these farmers.”

Mulford, who will dedicate 90 of his 150 acres to MFA Oil Biomass’s Aurora project area, is one of those farmers. He runs a 360,000-chicken poultry farm along with a cow and calf operation of about 30 animals. “Energy is a huge cost on my farm,” he says.

Situated in a logging industry region, Mulford has heated his six poultry barns with wood pellets made from sawdust since 2008, but the recent housing slump caused a shortage of feedstock. He plans to switch to about 120 tons per year of miscanthus pellets, knowing firsthand the feedstock is secure and furthering the advantages his BCAP participation will bring.

“I really think it’s going to stabilize the source of biomass,” Mulford says. “That will give me a place to buy biomass every year that’s dependable and reliable. And I get to grow my own so that offsets the cost even more.”

And such benefits aren’t lost on Coye-Huhn. “We recognized a couple years ago when we were assessing biomass projects that if you don’t have the ability to provide everything along the entire supply chain, you aren’t going to be successful.”

While the focus for the miscanthus grown on MFA and Aloterra’s BCAP project areas is pellets for now, other options and products are being explored. Pellets, however, are a very deliberate model for the companies because the technologies and markets already exist, Coye-Huhn says. “The bottom line is we need to make sure our farmers get the best return for their crop.”

BCAP in a Bind

While Aloterra has good news to report from its project areas and the same can be expected from most, if not all the other companies involved in BCAP, it’s going to be a tough road ahead. The U.S. House has voted to defund the program for 2012 and BCAP’s fate now lies in the Senate. The Senate Appropriations Committee has approved the 2012 Farm Bill with full BCAP funding. The Senate Appropriations Committee has approved the 2012 Farm Bill with full BCAP funding.

Still, Agriculture Secretary Tom Vilsack announced project areas after that devastating vote, including Aloterra’s and MFA’s, and has said he is working to convince the Senate to maintain funding.

“BCAP is certainly on a respirator right now,” Coye-Huhn says. “I’m an optimist by nature and I believe our Congress is starting to see the benefits. I know the Senate gets it and the House is starting to.” Even if the program survives funding cuts, Coye-Huhn thinks the matching payment element is still in trouble.

“I can’t say strongly enough how important this program is,” he says. “And exactly what the government wants to happen is happening.” Rural communities are being redeveloped, money is being put in farmers’ pockets and we are beginning to grow our own energy, he says, and it’s all happening very quickly. Mulford would add that he sees no negatives coming from the program and it has spurred him and others to take hold of the bioenergy industry, growing crops for the very first time. “Without BCAP, I don’t think I’d participate in this,” he adds.

The positive changes are coming about so quickly, in fact, that the point when BCAP funding isn’t needed to support a robust miscanthus industry may be right around the corner. “I really hope it gets to where we don’t need a BCAP program,” Mulford says, adding that he expects the price of rhizomes to decrease with the massive planting in the program, also influenced by Aloterra’s continued and growing supply.

“If we can make it with [BCAP] just helping us get started, that’s a successful program,” Mulford says.

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